Debate Paper 1: Is increasing profits the only social responsibility of business?
Historically, corporations and the government were two completely separate entities. The corporations could essentially do whatever they wanted as long as their processes remained within the confines of the law and the basic moral code that most people live by (DesJardins 36). Also, choosing to follow sustainably or ethically guided goals as a business directive has not proven to be very profitable for a given company in the past. Now the idea is that there is more that a company should be concerned about in order to remain competitive (DesJardins 41). The newer arguments state that appearing to care about more than just the bottom line will be greatly beneficial to a company in the long run. Many, if not most people in this country, would be considered stakeholders in this argument. The stakeholders involved in this are the consumers, the local citizens and ecology of businesses, the CEOs and the shareholders of a company, the company’s workers, and the government. All are impacted by the goals and processes of a business, but clearly some have more say than others towards the policies of the business. This unbalanced power leaves little room for anything other than a voluntary change of opinion on the part of the shareholders. Therefore, change will only happen if those who own the business are willing to make a change towards long term profits. I am not an economist, but as far as I know, most investors are not looking farther than 5 or 10 years down the road and often are only worried about how they will be directly impacted by a change in business decisions. Before radical change can occur, owners would have to be convinced that altering the goals of the company to allow for concerns for society and the environment to be addressed would benefit them.
While I may think that corporations should have more of a social responsibility, that isn’t an opinion shared by everyone. A free-enterprise is a system where CEOs have a responsibility to the shareholders. Shareholders are the ones who own and, by defining their goals for the company, control the decisions of the company. CEOs are hired to make money for the shareholders and are supposed to spend the money given to them by the shareholders in the way it is supposed to be spent (Friedman 2). They are not hired to search for opportunities to create more sustainable processes or search out ways to help the community. If the employees of the company would like to contribute their time and money to both of those tasks off of the company’s time and money then that is fine. Unless those tasks are directly going to make a profit for the company, it isn’t worth spending too much time on (Friedman 1). Since, as people, we have our own biases and responsibilities, a CEO’s personal goals or “social responsibilities” may contest with the goals of the company and it is important that he not let anything compete with his job for attention. “If these are ‘social responsibilities,’ they are the social responsibilities of individuals, not business” (Friedman 2). Friedman goes on to argue that as soon as a corporate executive begins spending money on society, he will become a “public employee” which isn’t a position one can hold unless they have been elected by the people (Friedman 3). The executive also should not presume to know more than the current policy makers in office about how to correct social problems. If they have not been capable of making things better, clearly there is something that a businessman would miss in their attempted corrections (Friedman 4). Finally, “[social responsibility] is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified on its own self-interest” (Friedman 5). This is explaining that even if a company were to be considerate towards the environment and society, it would be unable to do so without having blatantly selfish goals in mind.
There are a few problems with this argument. The first thing is that this is an older article written in 1970. It seems to operate under the impression that a business is functioning as its own separate system. Times have changed and now that studies have shown proof that business decisions directly cause adverse effects to the surrounding communities and environments, adjustments need to be made to account for that. These adjustments need to be along the lines of policy changes by businesses about their impacts on their local societies. At the same time, the fact that the article did recognize this as an issue 40 years ago shows that this is a problem that is not easily addressed. Along with the changing science, social norms have changed between when this article was written and the present economy. Since sustainability has recently become a marketable description for products, business goals have been changed to allow for more environmentally friendly commodities since it is likely that it will also increase profit. This contradicts what the article says about how doing good will only be done at the company’s expense and will not help them compete in a market setting (Friedman 4). Finally, politicians may not know of all of the problems faced in societies. Businesses have the money to reach out and often have personal connections to the people in those societies, so they should be allowed to offer to help if they want to.
Opposed to Friedman’s ideas, DesJardins’ main argument centers on the idea that economic goals cannot be the only goals of companies. It starts out by stating that the earth’s biosphere is the only place that business can take place and it is being threatened. Unless businesses begin to think about ecology and ethics along with their economic interests, the business as well as future generations will be in jeopardy (DesJardins 36). Times have changed and now society has been shown to be directly affected by the decisions of corporations. “Business has three equally compelling goals that must be balanced over the long-term” (DesJardins 38). Ethics and the environment are now two things that must be considered when making business decisions. Unfortunately, not all companies can become sustainable so we need to encourage the ones that can to change. It is also pointed out that sustainability can’t be treated as a fashion statement during this process since that won’t be as effective as a process (DesJardins 39-40). Adding sustainability as a goal also stands to benefit companies in a long run. Some of these benefits include “improved efficiencies, dematerialization, [and] reduction of energy use” (DesJardins 42). Others involve better placement in “green” markets, avoiding potential costs of being forced into sustainability by the government, and preventing future legal claims against the life-cycles of goods (DesJardins 42-44). All of these will appeal to consumers. While companies won’t want an entirely sustainable market as that would call for more reuse of goods which would drive demand down, this type of market could be a good opportunity that would allow companies to make a name for themselves in a sustainable market (DesJardins 49). A problem arises from the fact that as consumers we tend to not think with a sustainable mindset and, according to Juliet Shor, there are three main ideals that contribute to this. They are that people try to live above what they earn, rarely is there a full understanding of how much the environment is affected during the process of consumption, and there is an inherent competitiveness among humans to have the “best” (DesJardins 47). If those ideals can be changed, hopefully businesses would feel the pressure to change on their own to stay profitable and work towards greener supply chains and community planning that allows a company to become more sustainable. One of DesJardins’ last arguments focuses around the responsibility on the company’s part for the byproducts of the development and usage of their products as well as the end result after usage. Holding businesses accountable for the production pollution and after-usage pollution (life-cycle management), the author feels, is a step in the right direction forcing companies to think in a longer term (DesJardins 51). I agree, especially for incidences like Love Canal, which result in someone else having to clean up the horrifying mess.
As much as I agree with DesJardins’ argument, there are a couple problems that become apparent. One is: who will be responsible for the balancing the three ideals? I feel that people are inherently greedy and while they may have good intentions, everyone has their priorities. Having priorities means that there is some level of hierarchy in the decision making process. The “three pillars of sustainability” will never be at a complete balance no matter how many people are a part of the decision making process (DesJardins 38). Therefore there has to be some higher level that forces them to at least try to balance them. I don’t think that the government is allowed discriminate against certain companies over others, so the other alternative would be to limit pollution and material usage. This would cause a need to determine exactly what the cause is and limit that, thereby changing the laws that companies have to abide by. There are two main problems with this. One, government will have to get involved in business and two, it forces many large corporations to become more involved with the government by becoming more resolved to prevent regulations from becoming stricter so they can remain a free market (DesJardins 39). Also, while it’s good that the environment would be better safeguarded, these policy changes may result in resentment towards the officials setting the requirements (DesJardins 40). The easiest and least controversial way to change the system, I feel, would be to have consumers change the demand towards something more sustainable. Businesses follow based on what is “popular” and if sustainability becomes popular, it is much more likely that these trends will occur automatically (DesJardins 45). I don’t think that advertising sustainability is necessarily a bad thing. While it does have its drawbacks, like proprietary agreements preventing others from using the same sustainable practices, at least it creates a competitive edge that causes companies to try to bring something more sustainable to the floor. Plus, as it becomes “fashionable” it causes people to want to learn more about sustainability. The more someone knows about it, the more likely they are to do something about it on their own time (DesJardins 40). The other potential problem I see is with DesJardins’ argument about a business’ responsibility to take care of the used products. I agree that businesses should have responsibility over the end result of their product and/or held accountable for any harm that may occur because of production or usage of their product. The problem becomes, after the product is used, what is an easy sustainable way to recollect the goods? Who will be in charge of managing the recall and disposal? If a business does not see a way for this to be profitable, they will be hard pressed to find this a beneficial thing for them to spend time on (DesJardins 52).
The third article, “Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion,” for the most part expands on the ideas presented by DesJardins. It states that now is the critical time to rebuild the business model to have it focus more on charity. We need to develop “a more humane, more ethical and a more transparent way of doing business” (Van Marrewijk 95). By associating social responsibility with humanity, the author is in essence saying that business as it stands is inhumane. Most people would be uncomfortable with this comparison and would tend to feel that change would be necessary. While DesJardins focuses more on how becoming more sustainable and having more social responsibilities will help a company in the long run, Van Marrewijk takes on the task of trying to define what social responsibility is and why it is so difficult for a corporation to make substantial progress in that area. He says that there is no one definition of social responsibility. There is often bias due to the situation and location of the business. This becomes a problem because if everyone brings different concerns to the table, one action plan does not exist that will satisfy all corporations’ needs (Van Marrewijk 96). This forces companies to focus time and effort on developing a plan to satisfy what it considers its responsibilities. This bit agrees with Friedman that in order to consider social responsibility, it would require a great deal of time and money on the company’s part. The article mentions Friedman and his ideal of “the social responsibility of business is to increase its profits.” It counters the argument like the DesJardins article did by saying that considering the environment and other social aspects may be in the company’s best interest for long-term profitability (Van Marrewijk 96). The main problem I see with this argument is that more often than not, investors aren’t thinking more than 5 or 10 years down the road which isn’t really long-term. A business also needs to realize both its goals as a whole, as well as recognize that it is a part of something larger that must work for the business to succeed (Van Marrewijk 98). This contradicts the Friedman article as that was working on the idea that a business was its own working entity. We can’t remove ourselves from business completely or otherwise the way of living that many are accustomed to will no longer be an option, but it is still necessary to “root out cancer cells” which are corrupting the system (DesJardins 39, Van Marrewijk 99). I agree that this is the route to take. This seems to be the best way to allow most if not all people to keep their jobs, maybe even creating new ones in the process. The cancer cells do not have to be people; they may be business practices that are no longer the best business practices. Overall, I think all three articles stress the importance of profitability for companies; they just disagree on the best way to go about doing that.
When I was looking for a third article, it was very difficult to find something recent that defended the idea that the only business responsibility was to make profits. I couldn’t tell if this was showing a shift in ideals from 40 years ago or if more people feel that they have to convince others that it is a problem because the ideals haven’t changed. I think that science has become more concrete in the problems caused by big business. While there are businesses out there that don’t recognize all of the problems associated with their company, I feel that most people are starting to realize that sustainability is something they want from the commodities that they are buying, which forces companies to start thinking about it. I think it is inevitable that environment is going to need to become something companies worry about. It is also necessary that companies recognize their societal impact. I think that, even for strictly business purposes, those who are advertising their sustainable attributes as well as helping local societies will definitely appeal to more workers. I have found in my limited experience that the more people like and want to work for the company they are employed by the more productive the company will be as a whole. Even if the employees and consumers can see it as a business maneuver, it is still better than companies not doing anything about it. I would ideally wish that the government won’t have to step in to create laws that would force companies to behave this way, but if that is what it takes to ensure the health and freedoms of those in local societies, it may be necessary. Before that point, I think it is necessary to at least try to make sure that the CEOs and shareholders of businesses realize how helping society and the environment will help them on making profits too which, even if they decide to have three , will still remain the primary goal of the business.
Works Cited
DesJardins, Joe. “Business and Environmental Sustainability.” Business & Professional Ethics Journal Vol 24. 2005.
Friedman, Milton. “The Social Responsibility of a Business is to Increase its Profits.” The New York Times Magazine. 13 September 1970.
Van Marrewijk, Marcel. “Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion.” Journal of Business Ethics Vol. 44, pg 95-105. 2003.
Historically, corporations and the government were two completely separate entities. The corporations could essentially do whatever they wanted as long as their processes remained within the confines of the law and the basic moral code that most people live by (DesJardins 36). Also, choosing to follow sustainably or ethically guided goals as a business directive has not proven to be very profitable for a given company in the past. Now the idea is that there is more that a company should be concerned about in order to remain competitive (DesJardins 41). The newer arguments state that appearing to care about more than just the bottom line will be greatly beneficial to a company in the long run. Many, if not most people in this country, would be considered stakeholders in this argument. The stakeholders involved in this are the consumers, the local citizens and ecology of businesses, the CEOs and the shareholders of a company, the company’s workers, and the government. All are impacted by the goals and processes of a business, but clearly some have more say than others towards the policies of the business. This unbalanced power leaves little room for anything other than a voluntary change of opinion on the part of the shareholders. Therefore, change will only happen if those who own the business are willing to make a change towards long term profits. I am not an economist, but as far as I know, most investors are not looking farther than 5 or 10 years down the road and often are only worried about how they will be directly impacted by a change in business decisions. Before radical change can occur, owners would have to be convinced that altering the goals of the company to allow for concerns for society and the environment to be addressed would benefit them.
While I may think that corporations should have more of a social responsibility, that isn’t an opinion shared by everyone. A free-enterprise is a system where CEOs have a responsibility to the shareholders. Shareholders are the ones who own and, by defining their goals for the company, control the decisions of the company. CEOs are hired to make money for the shareholders and are supposed to spend the money given to them by the shareholders in the way it is supposed to be spent (Friedman 2). They are not hired to search for opportunities to create more sustainable processes or search out ways to help the community. If the employees of the company would like to contribute their time and money to both of those tasks off of the company’s time and money then that is fine. Unless those tasks are directly going to make a profit for the company, it isn’t worth spending too much time on (Friedman 1). Since, as people, we have our own biases and responsibilities, a CEO’s personal goals or “social responsibilities” may contest with the goals of the company and it is important that he not let anything compete with his job for attention. “If these are ‘social responsibilities,’ they are the social responsibilities of individuals, not business” (Friedman 2). Friedman goes on to argue that as soon as a corporate executive begins spending money on society, he will become a “public employee” which isn’t a position one can hold unless they have been elected by the people (Friedman 3). The executive also should not presume to know more than the current policy makers in office about how to correct social problems. If they have not been capable of making things better, clearly there is something that a businessman would miss in their attempted corrections (Friedman 4). Finally, “[social responsibility] is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified on its own self-interest” (Friedman 5). This is explaining that even if a company were to be considerate towards the environment and society, it would be unable to do so without having blatantly selfish goals in mind.
There are a few problems with this argument. The first thing is that this is an older article written in 1970. It seems to operate under the impression that a business is functioning as its own separate system. Times have changed and now that studies have shown proof that business decisions directly cause adverse effects to the surrounding communities and environments, adjustments need to be made to account for that. These adjustments need to be along the lines of policy changes by businesses about their impacts on their local societies. At the same time, the fact that the article did recognize this as an issue 40 years ago shows that this is a problem that is not easily addressed. Along with the changing science, social norms have changed between when this article was written and the present economy. Since sustainability has recently become a marketable description for products, business goals have been changed to allow for more environmentally friendly commodities since it is likely that it will also increase profit. This contradicts what the article says about how doing good will only be done at the company’s expense and will not help them compete in a market setting (Friedman 4). Finally, politicians may not know of all of the problems faced in societies. Businesses have the money to reach out and often have personal connections to the people in those societies, so they should be allowed to offer to help if they want to.
Opposed to Friedman’s ideas, DesJardins’ main argument centers on the idea that economic goals cannot be the only goals of companies. It starts out by stating that the earth’s biosphere is the only place that business can take place and it is being threatened. Unless businesses begin to think about ecology and ethics along with their economic interests, the business as well as future generations will be in jeopardy (DesJardins 36). Times have changed and now society has been shown to be directly affected by the decisions of corporations. “Business has three equally compelling goals that must be balanced over the long-term” (DesJardins 38). Ethics and the environment are now two things that must be considered when making business decisions. Unfortunately, not all companies can become sustainable so we need to encourage the ones that can to change. It is also pointed out that sustainability can’t be treated as a fashion statement during this process since that won’t be as effective as a process (DesJardins 39-40). Adding sustainability as a goal also stands to benefit companies in a long run. Some of these benefits include “improved efficiencies, dematerialization, [and] reduction of energy use” (DesJardins 42). Others involve better placement in “green” markets, avoiding potential costs of being forced into sustainability by the government, and preventing future legal claims against the life-cycles of goods (DesJardins 42-44). All of these will appeal to consumers. While companies won’t want an entirely sustainable market as that would call for more reuse of goods which would drive demand down, this type of market could be a good opportunity that would allow companies to make a name for themselves in a sustainable market (DesJardins 49). A problem arises from the fact that as consumers we tend to not think with a sustainable mindset and, according to Juliet Shor, there are three main ideals that contribute to this. They are that people try to live above what they earn, rarely is there a full understanding of how much the environment is affected during the process of consumption, and there is an inherent competitiveness among humans to have the “best” (DesJardins 47). If those ideals can be changed, hopefully businesses would feel the pressure to change on their own to stay profitable and work towards greener supply chains and community planning that allows a company to become more sustainable. One of DesJardins’ last arguments focuses around the responsibility on the company’s part for the byproducts of the development and usage of their products as well as the end result after usage. Holding businesses accountable for the production pollution and after-usage pollution (life-cycle management), the author feels, is a step in the right direction forcing companies to think in a longer term (DesJardins 51). I agree, especially for incidences like Love Canal, which result in someone else having to clean up the horrifying mess.
As much as I agree with DesJardins’ argument, there are a couple problems that become apparent. One is: who will be responsible for the balancing the three ideals? I feel that people are inherently greedy and while they may have good intentions, everyone has their priorities. Having priorities means that there is some level of hierarchy in the decision making process. The “three pillars of sustainability” will never be at a complete balance no matter how many people are a part of the decision making process (DesJardins 38). Therefore there has to be some higher level that forces them to at least try to balance them. I don’t think that the government is allowed discriminate against certain companies over others, so the other alternative would be to limit pollution and material usage. This would cause a need to determine exactly what the cause is and limit that, thereby changing the laws that companies have to abide by. There are two main problems with this. One, government will have to get involved in business and two, it forces many large corporations to become more involved with the government by becoming more resolved to prevent regulations from becoming stricter so they can remain a free market (DesJardins 39). Also, while it’s good that the environment would be better safeguarded, these policy changes may result in resentment towards the officials setting the requirements (DesJardins 40). The easiest and least controversial way to change the system, I feel, would be to have consumers change the demand towards something more sustainable. Businesses follow based on what is “popular” and if sustainability becomes popular, it is much more likely that these trends will occur automatically (DesJardins 45). I don’t think that advertising sustainability is necessarily a bad thing. While it does have its drawbacks, like proprietary agreements preventing others from using the same sustainable practices, at least it creates a competitive edge that causes companies to try to bring something more sustainable to the floor. Plus, as it becomes “fashionable” it causes people to want to learn more about sustainability. The more someone knows about it, the more likely they are to do something about it on their own time (DesJardins 40). The other potential problem I see is with DesJardins’ argument about a business’ responsibility to take care of the used products. I agree that businesses should have responsibility over the end result of their product and/or held accountable for any harm that may occur because of production or usage of their product. The problem becomes, after the product is used, what is an easy sustainable way to recollect the goods? Who will be in charge of managing the recall and disposal? If a business does not see a way for this to be profitable, they will be hard pressed to find this a beneficial thing for them to spend time on (DesJardins 52).
The third article, “Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion,” for the most part expands on the ideas presented by DesJardins. It states that now is the critical time to rebuild the business model to have it focus more on charity. We need to develop “a more humane, more ethical and a more transparent way of doing business” (Van Marrewijk 95). By associating social responsibility with humanity, the author is in essence saying that business as it stands is inhumane. Most people would be uncomfortable with this comparison and would tend to feel that change would be necessary. While DesJardins focuses more on how becoming more sustainable and having more social responsibilities will help a company in the long run, Van Marrewijk takes on the task of trying to define what social responsibility is and why it is so difficult for a corporation to make substantial progress in that area. He says that there is no one definition of social responsibility. There is often bias due to the situation and location of the business. This becomes a problem because if everyone brings different concerns to the table, one action plan does not exist that will satisfy all corporations’ needs (Van Marrewijk 96). This forces companies to focus time and effort on developing a plan to satisfy what it considers its responsibilities. This bit agrees with Friedman that in order to consider social responsibility, it would require a great deal of time and money on the company’s part. The article mentions Friedman and his ideal of “the social responsibility of business is to increase its profits.” It counters the argument like the DesJardins article did by saying that considering the environment and other social aspects may be in the company’s best interest for long-term profitability (Van Marrewijk 96). The main problem I see with this argument is that more often than not, investors aren’t thinking more than 5 or 10 years down the road which isn’t really long-term. A business also needs to realize both its goals as a whole, as well as recognize that it is a part of something larger that must work for the business to succeed (Van Marrewijk 98). This contradicts the Friedman article as that was working on the idea that a business was its own working entity. We can’t remove ourselves from business completely or otherwise the way of living that many are accustomed to will no longer be an option, but it is still necessary to “root out cancer cells” which are corrupting the system (DesJardins 39, Van Marrewijk 99). I agree that this is the route to take. This seems to be the best way to allow most if not all people to keep their jobs, maybe even creating new ones in the process. The cancer cells do not have to be people; they may be business practices that are no longer the best business practices. Overall, I think all three articles stress the importance of profitability for companies; they just disagree on the best way to go about doing that.
When I was looking for a third article, it was very difficult to find something recent that defended the idea that the only business responsibility was to make profits. I couldn’t tell if this was showing a shift in ideals from 40 years ago or if more people feel that they have to convince others that it is a problem because the ideals haven’t changed. I think that science has become more concrete in the problems caused by big business. While there are businesses out there that don’t recognize all of the problems associated with their company, I feel that most people are starting to realize that sustainability is something they want from the commodities that they are buying, which forces companies to start thinking about it. I think it is inevitable that environment is going to need to become something companies worry about. It is also necessary that companies recognize their societal impact. I think that, even for strictly business purposes, those who are advertising their sustainable attributes as well as helping local societies will definitely appeal to more workers. I have found in my limited experience that the more people like and want to work for the company they are employed by the more productive the company will be as a whole. Even if the employees and consumers can see it as a business maneuver, it is still better than companies not doing anything about it. I would ideally wish that the government won’t have to step in to create laws that would force companies to behave this way, but if that is what it takes to ensure the health and freedoms of those in local societies, it may be necessary. Before that point, I think it is necessary to at least try to make sure that the CEOs and shareholders of businesses realize how helping society and the environment will help them on making profits too which, even if they decide to have three , will still remain the primary goal of the business.
Works Cited
DesJardins, Joe. “Business and Environmental Sustainability.” Business & Professional Ethics Journal Vol 24. 2005.
Friedman, Milton. “The Social Responsibility of a Business is to Increase its Profits.” The New York Times Magazine. 13 September 1970.
Van Marrewijk, Marcel. “Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion.” Journal of Business Ethics Vol. 44, pg 95-105. 2003.
My notes for rough draft:
Final draft: